Leasehold woe blunts Taylor Wimpey's profit

Profits at the UK’s second biggest housebuilder were hammered in the first half after setting aside £130m to help homebuyers affected by the leasehold scandal.

Taylor Wimpey said in April it had earmarked the sum to help leaseholders who bought homes with high or escalating ground rent charges.

In a note accompanying its results for the six months to July 2, the firm said: “The process of negotiation with the owners of the freeholds to these leasehold properties is on-going, and is proceeding in line with our expectations, and we continue to keep customers updated on the progress of these discussions.”

It added: “We continue to view the provision, before tax, of £130 million as an appropriate estimate.”

The provision meant pre-tax profits slumped nearly a quarter, ending up 24% down to £205m.

Otherwise, the firm was upbeat with the firm reporting that underlying profits were up close to 26% to £335m on revenue up 18.5% to £1.7bn.

Chief executive Pete Redfern (pictured) said: “Trading through the first half of 2017 has been very positive, supported by favourable UK housing market fundamentals and good customer confidence.” He added that confidence was coming back to the central London market following a period of uncertainty.

But Cenkos analyst Kevin Cammack said the results lacked the wow factor. He added: “No complaints at all with the interims but momentum is limited. Forecasts [for 2017 and 2018] are unlikely to do more than edge up.”

The group built 9.3 per cent more homes than a year earlier, bringing the total to 6,580, and pushed up the average selling price, excluding joint ventures, to £253,000.

But it warned the cost of building each home had gone up to £137,400 – an increase of £8,000 – and said that build costs would rise by around 3-4% over this year. It said the rise was largely down to hikes in labour overheads.

The firm added that it plans to return £340m in dividends to shareholders next July.